Tackle your financial issues now to avoid problems later

Running into financial trouble could happen to the best of us – but it’s better to tackle your problems early to avoid credit-related problems later. And even if you find yourself with listings or judgments against your name, there are still several things you can do to restore your credit score.

If you’re struggling to pay your bills, you are not alone. According to TransUnion’s latest Q1 2020 South Africa Industry Insights Report, consumer debt balances have increased sharply in the past 12 months. We’re seeing people turn to unsecured credit more than ever, including credit cards and personal loans, to cover everyday expenses.

If you think you are going to default on any payments in the coming months, know this: you can get help before you are listed with a credit bureau. In fact, now is the best time to be negotiating with your credit providers on what you can afford, and to take advantage of any payment plans that they may be offering.

It’s always best to be proactive – and the first step is to view your credit information. It can be quite nerve-wracking to check your credit status, particularly if you’ve defaulted on a payment or have had a judgment against you from the past. According to the latest report from the National Credit Regulator, less than one in every ten credit-active South Africans actually access their credit report annually.

It’s confidential, free and easy to get hold of your credit report, and you should check it regularly to keep track of your debt, payment behaviour and credit history.

What happens if you do nothing about your payment issues?

If you find yourself falling behind on payments, and don’t make alternative arrangements with your lenders, you may find yourself in default. Another term for this is “failure to pay”, and when you miss a payment for more than three months, action can be taken against you.

This is particularly important right now as many peoples’ COVID-19 payment holidays start coming to an end. If you have suspended your payments for a period, but still find yourself unable to meet your obligations, go back to your credit providers to make new arrangements, or you could find yourself in default.

A default stays on your credit report for one year until you bring the account up to date. The effects of this could include:

  • Your chances of getting credit in the future may be lower
  • If you get credit, you will probably pay more for it to cover the lender’s risk
  • Your chances of getting a job could be affected, especially if you work in an area that requires you dealing with cash or finances.

If you continue to ignore your debts, a more serious action can be taken by a lender who can get a court judgment against you. You do not want this. A judgment stays on your credit report for five years, or until the debt is paid in full. You will not be able to get any credit or take any loans during this time.

What to do once you’ve accessed your credit report

First, check that the information in the report is accurate. If you find inaccurate or out-of-date information, you can lodge a dispute with the credit bureau and lender immediately. Remember: the information isn’t gathered by the credit bureau. It is supplied by the financial institutions.

If you want to lodge a dispute, here’s how the process works:

  • You must log your dispute within three months of receiving the credit report.
  • Submit your challenge for all incorrect information: late payments that were actually paid in time, accounts that you don’t own, or any entries that are out of date or inaccurate.
  • Submit all your supporting documents to prove your complaint, including your ID and proof of address.
  • The credit bureau will investigate your claim. The credit bureau has to respond to you within 20 working days.
  • If you’re not satisfied with the result of the investigation, you can contact the Credit Information Ombud, which helps resolve conflicts in the credit industry. The final step is to approach the National Credit Regulator for help.

The advantage of this process is that it might allow you to apply for credit again, or get a better rate when you apply for a loan. If the information is accurate, you will be able to understand your credit status better. This is the first step to taking control of your credit, and moving yourself to a more positive score.

Until the end of July, TransUnion is offering you free Credit Score, Report and Profile Alerts to help you make the right financial decisions and to protect your credit health.